Unregistered Housing Societies

August 28, 2019
By Team MyGate
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A registered society is a legal entity by itself, subject to the laws, liabilities, and rights under the government of India. Mandatory bye-laws applicable to a registered society ensure smooth functioning of the day to day affairs and in case of disputes, faster and more streamlined resolutions are available to the registered housing societies. Let’s understand why it is critical to register a society.

Why is it important to register a society?

The Societies Registration Act 1960 or a registration act applied by the state government provides clearly defined steps on how to register a housing society. Listed below are the advantages of registering your society:

1. Regular and uniform maintenance charges: Only if your society is registered, the model bye-laws are applicable to every resident. Each member is mandated to pay maintenance charges under the law. In an unregistered society or apartment association, members cannot be forced to do so. In most cases, the members are themselves held accountable for fixing any damage or paying for services since there is no managing committee to look after such needs. Thus it has been observed that while in an unregistered society, some members get together, form an Adhoc committee and collect maintenance charges. Some members pay willingly while others refuse to pay up, burdening others with their share of financial responsibility. In the case of a registered society, the Managing Committee can penalise defaulting members and collect the dues as well as interest.

2. Internal dispute resolution: The managing committee of the society has the right to act as a mediator or arbitrator with the power to resolve disputes among members. In case of an unregistered society, with no supervising authority, petty or big disputes such as parking slot occupancy, late-night partying, the encroachment of space, etc.persists without a satisfactory resolution. In worst-case scenarios, members facing major problems have the option to approach the police or civil court. But if a society is registered, many problems find solutions with peaceful negotiation and conflict resolution provided by the managing committee.

3. Tax benefits: An unregistered society cannot avail and enjoy the tax benefits provided to a registered society. In other words, tax is levied on the society if registered, not on the individual members, thus certain exemptions that co-operative societies enjoy are not open to individual unregistered societies.

4. Better financial accountability: Registered societies have a separate bank account under the society’s name devoted only for the financial transactions of the society. They have the right to collect deposits, annual Sinking Fund and regular maintenance charges from the members. Thus any emergency expenses or repair are promptly and easily taken care of. Yearly financial audits ensure no embezzlement occurs. In the case of unregistered societies, members pay heavy amounts out of pocket to fix any broken amenities or if an emergency occurs. This is not a feasible approach to handling financial management in the long run.

5. Complete rights over premises: In the case of a registered housing society, the builder hands over the charge of entire premises to the society. In case of a standalone apartment complex or unregistered society, the builder has the right to common areas including terraces, parking areas, etc., which they can put for sale. Increased Floor Space Index (FSI) is also of interest to the builder. Registered societies have the right to all the premises including FSI, thus giving them complete autonomy of occupation and management.

6. Safer environment: In a registered society, the homeowner is required to take the permission of the society before renting out his residence and a screening/ police verification is done. In the case of unregistered individual apartments or homes, the owner can lease out the property to anyone regardless of their social or criminal status. This could lead to illegal or anti-social activities in the rented residence (although this is not always the case). In general, a registered society has set rules in place to maintain the safety and security of its residents. Such may not be the case with unregistered societies.

What are the registration options?

To register as a co-operative housing society, a minimum of 10 members (varies from state to state) are needed to apply for registration with a society name reservation, along with the name, address, share capital, entrance fee from each promoter member, which need to be deposited in the bank suggested by the Registrar. Some vital documents needed for registration are 7/12 extract of the land or property card, title deed, sanctioned layout/plans, Completion Certificate, OC, NOC from various authorities, Architect Certificate, list of members, Notarized Guarantee letter by the Chief Promoter, Promoter Members, Builders, affidavits, two copies of bye-laws, and other essential documents asked by the Registrar.

Another option (for apartment complexes) is to form an Apartment Owners Association, which is not a co-operative society but gets the legal benefits under the law, can act as an arbitrator for disputes, collect maintenance fees and dues, and manage the amenities and common spaces. Documents needed are proposal letter to the Registrar signed by all committee members, name and address of the association, proceedings of the first general body meeting, memorandum of association, bye-laws and registration fees.

A registered society is a legal entity in itself

A registered co-operative housing society can approach a number of legal authorities to solve its disputes, whether they be cases against the builder’s malfeasance or neglect, a vendor’s fraudulent business transactions or inadequate water supply. Similarly, membership issues, non-maintenance or fraud within the managing committee can also be remedied by taking legal action against societies. The legal avenues are the Registrar, Co-operative Court, Municipal Corporation, Civil Court, Criminal Court, or the police (all depending on the nature of the complaint). In the case of unregistered societies or apartment association, one usually has to approach the civil court of the area and there can be a significant loss of time in the process and delayed results are usually the norm. Co-operative courts generally provide verdicts faster.

The prudent and advantageous action would be to register your society at the earliest and receive a complete handover from the builder. Not registering your society can leave you vulnerable to disasters and unforeseeable circumstances.

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